Yvanova vs. New Century Mortgage Corporation No.S218973 Supreme Court of California

When the California Courts issued the decision of Glaski v. Bank of America, supra, 218 Cal.App.4th 1079, I did not get that excited and did not pay much attention.  Glaski was issued in a "non-judicial" state; Glaski involved a claim for wrongful foreclosure; it was an appellate decision; and other Appellate decisions distinguished or criticied Glaski.  However, the recent decision of Yvanova vs. New Century Mortgage Corporation, in which the California Supreme Court determines that a homeowner can challenge an assignment as void, is exciting.

There are still all of those reasons to criticize the California decision.  It is a "non-judicial" state, and even the opinion states that the opinion is on a limited and narrow issue.  However, in Yvanova, the Court discusses the issue with such clarity and in such plain language that Courts will be hard pressed to ignore its holding.  Yvanova starts with the simple premise that only a person or entity with an interest in the promissory note or mortgage can sue to enforce the promissory note or foreclose upon the mortgage.  (A simple concept that the Courts and Banks have contorted into unrecognizable pretzel like images of the original concept.).  Yvanova then discusses the difference between a void and a voidable transaction.  

The Yvanova Court discusses many of the other cases from other jurisdictions that the Ohio Courts have ignored and continue to ignore.   However, the California Supreme Court has gathered many of these cases from other jurisdictions in one place and discusses them all in detail.  In Yvanova the Court addresses the debate; engages in the debate, and makes a well reasoned choice between the two sides.  Yvanova determines that the Homeowner can challenge the validity of an assignment as being void, and does so in a manner that does not appear to be the result of result oriented circuitous reasoning.

With the recent decision of U.S. Bank Natl. Assn. v. George (Ohio App. 10th Dist.), 2015-Ohio-4957, and Anh Nguyet Tran vs. Bank of New York Petition for Writ of Certiorari, the issue of standing, and now the California Supreme Court issuing a well reasoned opinion in support of the homeowners right to challenge the validity of an assignment, it may be that the tide is turning in favor of the homeowner.

The Law Office of Bruce M. Broyles: Ohio Homeowners may be able to Assert Failure to C...

The Law Office of Bruce M. Broyles: Ohio Homeowners may be able to Assert Failure to C...: In several  previous posts; April 5, 2013 Failure to Comply with PSA Results in Void Judgment; and August 2, 2013 Update on Failure to Comp...

Ohio Homeowners may be able to Assert Failure to Comply with PSA

In several  previous posts; April 5, 2013 Failure to Comply with PSA Results in Void Judgment; and
August 2, 2013 Update on Failure to Comply with PSA, I argued that Homeowners facing foreclosure are entitled to assert the failure to comply with the pooling and servicing agreement.  I stated that the failure to comply with the PSA would result in a void transfer of the promissory note or a void assignment of the mortgage.  In a post September 29, 2015 Anh Nguyet Tran vs. Bank of New York Petition for Writ of Certiorari, I asserted that Anh Nguyet Tran highlighted a similar battle being fought in Ohio as Homeowners are prevented from asserting challenges to the validity of the assignment based upon appellate court decisions that rely upon Bank of New York Mellon vs. Unger (Ohio App. 8^th Dist.) 2012-Ohio-1950.  

The argument that I have been making that the federal cases relied upon by Unger were being misinterpreted.  I relied upon the Alexander vs. Deutsche Bank National Trust Co. (N.D. Ohio West Dis.) Case No.: 3:12-CV-02704; and Slorp vs. Lerner Sampson & Rothfuss, 587 Fed.Appx. 249.  According to Alexander and Slorp Ohio Homeowners should be able to challenge the validity of assignments if the challenge would result in a void transaction.

Now the Court of Appeals for the Tenth District has made the same argument in granting a homeowner facing foreclosure the right to challenge an assignment as being void.  

In U.S. Bank Natl. Assn. v. George (Ohio App. 10th Dist.), 2015-Ohio-4957, the Court held:

Because we have reversed the trial court's summary judgment on issues concerning the note and appellants' challenge to appellee's standing to enforce the note, we necessarily overrule our prior holding in LSF6 Mercury REO Invests. Trust Series 2008-1 v. Locke , 10th Dist. No. 11AP-757, 2012-Ohio-4499. In Locke, we held that the makers of notes and mortgages are without standing to challenge the validity of transfers or assignments to which they were not parties.  ***

We believe that at least one of the underlying cases relied on by the court in Locke has been clarified to the point that its premise as we surmised it no longer supports what we previously held in Locke denying standing to non-privity challengers of note and mortgage transfers and assignments. We thus extend our holding in Pasqualone to clarify that standing broadly exists for persons to challenge the validity of the transfer of a note4 or assignment of the mortgage, whether or not in privity with the person entitled to enforce the note or mortgage, regardless of whether or not the note has been negotiated and transferred under R.C. Chapter 13, Ohio's codification of the Uniform Commercial Code.
***

The maker of a note or mortgagor who is facing enforcement at law on the note or enforcement in equity on the mortgage has a personal stake in challenging whether a person claiming to be entitled to enforce such a note or a mortgage has been duly transferred or assigned rights under either or both instruments, regardless of whether or not the challenger is in privity with the person claiming the right to enforce.

The Court in George went on to explain that the cases upon which it relied upon in Locke had been clarified, stating:

Locke's holding is based in part on a line of federal court decisions5 that, even since we decided Pasqualone, has been modified by the Sixth Circuit Court of Appeals. In Slorp v. Lerner, Sampson & Rothfuss, 587 Fed.Appx. 249, 254-56 (6th Cir. 2014), the United States Sixth Circuit Court of Appeals held: [Slorp] attributes his injuries to the improper foreclosure litigation. According to the complaint, [defendant] Bank of America (through LSR) filed a foreclosure action against Slorp despite its lack of interest in the mortgage; the defendants misled the trial court by fraudulently misrepresenting Bank of America's interest in the suit; and Slorp incurred damages when he was compelled to defend his interests. If Bank of America had no right to file the foreclosure action, it makes no difference whether Slorp previously had defaulted on his mortgage. * * * [T]he district court erred when it held otherwise. * * * Much of the district court's analysis was taken from Livonia Properties Holdings, LLC v. 12840-12976 Farmington Road Holdings, LLC, [717 F.Supp.2d 724 (E.D.Mich.2010), aff'd, 399 Fed.Appx. 97 (6th Cir.2010)] where we held that a homeowner did not have standing to challenge the validity of a home-loan assignment in an action contesting a foreclosure. 399 Fed.Appx. 97, 102 (6th Cir.2010). We analyze the district court's holding in more detail than might ordinarily be necessary because our Livonia Properties opinion has confounded some courts and litigants, see, e.g., Etts v. Deutsche Bank Nat'l Trust Co., No. 13-11588, 2014 WL 645358, at *4 (E.D.Mich. Feb. 19, 2014) * * *. 5 See, e.g., Livonia Properties Holdings, L.L.C. v. 12840-12976 Farmington Rd. Holdings, L.L.C., 717 F.Supp.2d 724 (E.D.Mich.2010), aff'd, 399 Fed.Appx. 97 (6th Cir.2010). No. 14AP-817 14 The district court held, and the defendants now maintain, that Slorp lacked standing to assert his claims because an individual who is not a party to an assignment may not attack the assignment's validity. We differ with this interpretation of Livonia Properties. The sweeping rule that the district court extrapolated from Livonia Properties dwarfs our actual holding in that case. (Footnote deleted.) On summary judgment or otherwise, it is the movant's burden to establish the chain of transfers and assignments, if it is not the original mortgagee, and this is well-established in the law. Seimer at ¶ 19. That the mortgagor may not be a party or in privity to a party to an assignment contract should not operate to diminish in any way that burden. See Slorp at 255 ("a non-party homeowner may challenge the validity of an assignment to establish the assignee's lack of title, among other defects"). Thus, we clarify governing case law and overrule our previous holding in Locke, fully restoring the burden placed on the person asserting entitlement to enforce the note or mortgage. Accordingly, the maker of the note or mortgage has standing to challenge their enforcement against the maker, even if not a party in privity to the particular transfer or assignment challenged.

If U.S. Bank Natl. Assn. v. George allows the Homeowner to challenge the validity of an assignment then homeowners throughout the State of Ohio should be making this argument.